RS/10

BUDGET 2022-23
ECONOMIC SURVEY 2021-22

by

VIVEK SINGH
/VivekSingh_Economy
 Budget 2022-23
(Budget is based on nominal figures)

Central Finances 2021-22 2022-23

Nominal GDP Rs. 232 lakh cr Rs. 258 lakh cr

Nominal Growth 11.1%

Total Expenditure Budget Rs. 37.7 lakh cr Rs. 39.5 lakh cr

 Revenue Expenditure Rs. 31.7 lakh crRs. Rs. 32.0 lakh cr

 Capital Expenditure Rs. 6.0 lakh crRs. Rs. 7.5 lakh cr

Total Receipts Rs. 37.7 lakh cr Rs. 39.5 lakh cr

 Revenue Receipts Rs. 20.8 lakh cr Rs. 22.1 lakh cr

 Capital Receipts Rs. 16.9 lakh cr Rs. 17.4 lakh cr
o Non-Debt Capital Receipts Rs. 1.0 lakh cr Rs. 0.8 lakh cr
o Debt Capital Receipts Rs. 15.9 lakh cr Rs. 16.6 lakh cr

Fiscal Deficit 6.9% (15.9 lakh cr) 6.4% (16.6 lakh cr)
Revenue Deficit 4.7% (10.9 lakh cr) 3.8% (9.9 lakh cr)
Effective Rev Deficit 3.7% 2.6 %
Primary Deficit 3.3% 2.8%

Tax to GDP (Centre) 10.86% 10.7%

(25.2 lcr/232 lcr) (27.6 lcr/258 lcr)

Budget Themes
 More focus on infrastructure (railways and multimodal connectivity/terminals, logistics),
Digital Technologies (Recognizing virtual assets as a taxable asset class, issuing digital
currency, e-passports, Digital University, Digital Banking Units, land record digitization,
payment platforms, 5G spectrum, building optical fibre network), new ways for financing,
Agri-startups, Fin tech, Drone Technology etc.
 Not major changes in tax except tax on transfer of virtual digital assets (crypto).
 Less focus on agriculture and rural infrastructure as compared to previous budgets.
 This budget makes a huge bet that enhanced government capital expenditure will crowd in
private sector investments and put the economy on a path to sustained long-term growth
 More focus on capital expenditure and less focus on fiscal consolidation
 Cities as centers of growth and urban planning
 Budget Announcements

Introduction
 India is at 75 years of Independence and we have entered the ‘Amrit Kaal’ - the 25-year-
long lead up to India@100.

 There are certain goals to be achieved in this Amrit Kaal to attain the Vision for India @100

 Complementing the macro-economic level growth focus with a micro-economic level all-
inclusive welfare focus
 Promoting digital economy & fintech, technology enabled development, energy
transition, and climate action, and
 Relying on virtuous cycle starting from private investment with public capital
investment helping to crowd-in private investment.

Part A
This Budget has sought to lay the foundation and give a blueprint to steer the economy over
the Amrit Kaal of the next 25 years – from India at 75 to India at 100. The following are the
four priority areas of the budget.

1) PM GatiShakti

 PM Gati Shakti is a transformative approach for economic growth and sustainable

development. The approach is driven by seven engines, namely, Roads, Railways,
Airports, Ports, Mass Transport, Waterways, and Logistics Infrastructure. All seven
engines will pull forward the economy in unison.

 This will be made possible by the efforts of Central Govt., State Govt. and the Private
sector.

 The touchstone of the Master Plan will be world-class modern infrastructure and
logistics synergy among different modes of movement – both of people and goods – and
location of projects. This will help raise productivity, and accelerate economic growth
and development.

 The National Highways network will be expanded by 25,000 km in 2022-23.

 Unified Logistics Interface Platform (ULIP) will be developed which will be a transparent
platform that will provide real time information to all stakeholders and will remove
asymmetry in information.

 Contracts for implementation of Multimodal Logistics Parks at four locations through

PPP mode will be awarded in 2022-23.

 ‘One (railway) Station-One Product’ concept will be popularized to help local businesses
& supply chains.

 Integration of Postal and Railways networks to provide seamless solutions for movement
of parcels
  Railways will develop new products and efficient logistics services for small farmers and
Small and Medium Enterprises.

 One hundred PM GatiShakti Cargo Terminals for multimodal logistics facilities will be
developed during the next three years.

 As a part of Atmanirbhar Bharat, 2,000 km of rail network will be brought under

Kavach, the indigenous world-class technology for safety and capacity augmentation in
2022-23. Four hundred new-generation Vande Bharat Trains will be developed and
manufactured during the next three years.

 Multimodal connectivity between mass urban transport and railway stations will be
facilitated on priority.

 National Ropeways Development Programme will be taken up on PPP mode.

2) Inclusive Development

 Chemical-free Natural Farming will be promoted throughout the country, with a focus
on farmers’ lands in 5-km wide corridors along river Ganga, at the first stage.

 2023 been announced as the International Year of Millets. Support will be provided for
post-harvest value addition, enhancing domestic consumption, and for branding millet
products nationally and internationally.

 Use of ‘Kisan Drones’ will be promoted for crop assessment, digitization of land records,
spraying of insecticides, and nutrients.

 A fund will be set up through NABARD which will finance startups for agriculture and
rural enterprise relevant for farm produce value chain. The activities for these startups
will include, inter alia, support for FPOs, machinery for farmers on rental basis at farm
level, and technology including IT-based support.

 Several river linking projects (example Ken Betwa) will be taken up to provide irrigation
benefits, drinking water supply, hydro and solar projects.

 Udyam, e-Shram, NCS and ASEEM portals will be interlinked.

 Emergency Credit Line Guarantee Scheme (ECLGS), which has provided much needed
additional credit to various MSMEs, will be extended till March 2023.

 Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) scheme will be
revamped with required infusion of funds.

 Digital Ecosystem for Skilling and Livelihood (DESH) e-portal will be launched to
empower citizens to skill, reskill or upskill through on-line training.

 A Digital University will be established to provide access to students across the country
for world-class quality universal education.
  Border villages with sparse population, limited connectivity and infrastructure often get
left out from the development gains. Such villages on the northern border will be
covered under the new Vibrant Villages Programme. The activities will include
construction of village infrastructure, housing, tourist centres, road connectivity,
provisioning of decentralized renewable energy, direct to home access for Doordarshan
and educational channels, and support for livelihood generation.

 In 2022, 100 per cent of 1.5 lakh post offices will come on the core banking system
enabling financial inclusion and access to accounts through net banking, mobile
banking, ATMs, and also provide online transfer of funds between post office accounts
and bank accounts.

 75 Digital Banking Units (DBUs) in 75 districts of the country will be set up by

Scheduled Commercial Banks.

3) Productivity Enhancement & Investment, Sunrise Opportunities, Energy Transition, and

Climate Action

 The issuance of e-Passports using embedded chip and futuristic technology will be
rolled out in 2022-23.

 Considering the constraint of space in urban areas for setting up charging stations at
scale, a battery swapping policy will be brought out and inter-operability standards will
be formulated.

 States will be encouraged to adopt Unique Land Parcel Identification Number to

facilitate IT-based management of records.

 Necessary amendments in the Insolvency and Bankruptcy Code (IBC) will be carried out
to enhance the efficacy of the resolution process and facilitate cross border insolvency
resolution.

 To reduce indirect cost for suppliers and work-contractors, the use of surety bonds as a
substitute for bank guarantee will be made acceptable in government procurements.

 To enable affordable broadband and mobile service proliferation in rural and remote
areas, five per cent of annual collections under the Universal Service Obligation Fund
will be allocated.

 The Special Economic Zones Act will be replaced with a new legislation that will enable
the states to become partners in ‘Development of Enterprise and Service Hubs’.

 Circular economy will be supported by active public policies covering regulations,

extended producers’ responsibilities framework and innovation facilitation.

 The policies and required legislative changes to promote agro forestry and private
forestry will be brought in.
4) Financing of Investments

 In the present situation, the virtuous cycle of investment requires public investment to
crowd-in private investment.

 Sovereign Green Bonds will be issued for mobilizing resources for green infrastructure.

 An International Arbitration Centre will be set up in the GIFT City for timely settlement
of disputes under international jurisprudence.

 Data Centers and Energy Storage Systems including dense charging infrastructure and
grid-scale battery systems will be included in the harmonized list of infrastructure. This
will facilitate credit availability for digital infrastructure and clean energy storage.

 Digital Rupee will be issued by RBI, using blockchain and other technologies, starting
2022-23.

 In 2022-23, in accordance with the recommendations of the 15th Finance Commission,

the states will be allowed a fiscal deficit of 4 per cent of GSDP of which 0.5 per cent will
be tied to power sector reforms.

 For 2022-23, Rs. 1 lakh crore has been allotted for the ‘Scheme of Financial Assistance
to States for Capital Investment’. These fifty-year interest free loans are over and above
the normal borrowings (4% of GSDP) allowed to States. States can use these funds
through this channel for implementing projects under Gati Shakti, rural roads,
digitization, and better town planning etc.

Part B
Fiscal Management

Already discussed at first page.

Part C
Direct Tax

 If the tax payer has made any mistakes in correctly estimating their income for tax payment
then an updated return can be filed by the tax payers within two years from the end of the
relevant assessment year, on payment of additional tax,.

 Alternate Minimum Tax for cooperatives has been reduced from 18.5% to 15% which is also
the rate for the corporates.

 At present, the Central Government contributes 14 per cent of the salary of its employee to
the National Pension System (NPS) Tier-I. This is allowed as a deduction in computing the
income of the employee. However, such deduction is allowed only to the extent of 10 per
cent of the salary in case of employees of the State government. To provide equal treatment
to both Central and State government employees, Govt. has proposed to increase the tax
 deduction limit from 10 per cent to 14 per cent on employer’s contribution to the NPS
account of State Government employees as well.

 Startups established before 31.03.2023 will be eligible for tax incentive for three
consecutive years out of 10 years from the year of incorporation. Earlier it was applicable
only for startups incorporated before 31.03.2022.

 Newly incorporated manufacturing companies which will start production before

31.03.2024 will have to pay a concessional tax of 15%. Earlier this date was 31.03.2023

 Any income from transfer of any virtual digital asset shall be taxed at the rate of 30 per
cent. Cost of acquisition can be deducted while computing such income. In order to capture
the transaction details, TDS of 1% needs to be deducted on payment made in relation to
transfer of virtual digital asset. Gift of virtual digital asset has also been proposed to be
taxed in the hands of the recipient.

Part D
Indirect Taxes

 Customs Duty rationalization/simplification has been proposed.

 To incentivize exports, customs duty exemptions are being provided on import of inputs.

 To encourage the efforts for blending of fuel, unblended fuel shall attract an additional
differential excise duty of Rs. 2/ litre from the 1st day of October 2022.
 Economic Survey 2021-22

Chapter 1: State of the Economy

(At Constant Prices) 2019-20 2020-21 2021-22

GDP Rs. 145.7 lcr Rs. 135 lcr Rs. 147.5 lcr
National Income Rs. 126.8 lcr Rs. 117.6 lcr Rs. 128.6 lcr
Population 134 cr 135.5 cr 137 cr
Per Capita GDP Rs. 1.09 lakh Rs. 1 lakh Rs. 1.08 lakh
Per Capita National Income Rs. 94,500 Rs. 86,700 Rs. 94,000

 The present year (2021-22) GDP at constant prices is expected to be marginally higher by
1.3% from 2019-20. So basically we have lost two years of output expansion. And as our
population growth is 1% so our per capita GDP and per capita National Income has slightly
decreased in 2021-22 as compared to 2019-20.

 The following table shows the annual growth of GVA at constant prices of Agriculture,
Industry and Services.
 The following table shows the share of agriculture, industry and services in nominal GVA.

 Latest advance estimates suggest that there is full recovery of all the components on the
demand side in 2021-22 except for private consumption. When compared to pre-pandemic
levels, recovery is most significant in exports followed by government consumption and
gross fixed capital formation. And an equally strong recovery was seen in imports.
 Investment, as measured by Gross Fixed Capital Formation (GFCF) is expected to see
strong growth of 15 per cent in 2021-22 and achieve full recovery of pre-pandemic level.
Government’s policy thrust on quickening virtuous cycle of growth via capital expenditure
and infrastructure spending has increased capital formation in the economy lifting the
investment to GDP ratio to about 29.6 per cent in 2021-22, the highest in seven years

Govt.’s strategy regarding economy:

 Most of the economic cycles/recessions in the past were demand side problem but this
pandemic related slowdown is not just a demand problem rather supply side as well.

 A distinguishing feature of India’s economic response to the pandemic has been an

emphasis on supply-side reforms rather than a total reliance on demand management.
These supply-side reforms include deregulation of numerous sectors, simplification of
processes, removal of legacy issues like ‘retrospective tax’, privatization, production linked
incentives and so on. Even the sharp increase in capital spending by the Government can
be seen as both demand and supply response as it creates infrastructure capacity for
future growth.

 Another important feature of the Government’s strategy is deregulation as well as process

reform. The former relates to reducing or removing the role of government from a particular
activity. In contrast, the latter broadly relates to simplification and smoothening of the
process for activities where the government’s presence as a facilitator or regulator is
necessary (example tax, voluntary liquidation, Govt.’s e-Marketplace etc).

 There are two common themes in India’s supply-side strategy:

1) Reforms that improve flexibility and innovation in order to deal with the long-term
unpredictability of the post-Covid world. This includes factor market reforms;
 deregulation of sectors like space, drones, geo-spatial mapping, process reforms like
those in government procurement and in telecommunications sector; removal of legacy
issues like retrospective tax; privatization and monetization, creation of physical
infrastructure, and so on.

2) Reforms aimed at improving the resilience of the Indian economy. These range from
climate/environment related policies; social infrastructure such as public provision of
tap water, toilets, basic housing, insurance for the poor, and so on; support for key
industries under Atmanirbhar Bharat; a strong emphasis on reciprocity in foreign trade
agreements, and so on.

 Govt. of India adopted ‘Barbel Strategy’ (of finance) i.e. hedging for the worst outcome
initially, and updating its response step-by step via feedback. It combined a bouquet of
safety-nets to cushion the impact on vulnerable sections of society/business, with a flexible
policy response based ‘Agile approach’ that uses feedback-loops, and real time adjustment.
The following are the seemingly two disparate legs of the Barbel strategy that Government
followed in response to covid pandemic:

1) One is the Agile framework which, in an uncertain environment, responds by assessing

outcomes in short iterations (High Frequency Indicators like CPI, IIP, Power
Consumption, CPI/WPI, Exports, GST collections etc.) and constantly adjusting
incrementally.

[It is important here to distinguish Agile from the “Waterfall” framework which has been
the conventional method for framing policy in India and most of the world. The Waterfall
approach entails a detailed, initial assessment of the problem followed by a rigid up-front
plan for implementation. This methodology works on the premise that all requirements
can be understood at the beginning and therefore pre-commits to a certain path of action.
This is the thinking reflected in five-year economic plans, and rigid urban master-plans].

The flexibility of Agile improves responsiveness and aids evolution, but it does not
attempt to predict future outcomes. This is why the other leg of the Barbell strategy is
also needed.

2) It (the other leg) cushions for unpredictable negative outcomes by providing safety nets.
This explains why the Government’s initial measures in 2020-21 were mostly about
making food available to the poor, providing emergency liquidity support for MSMEs
and holding the Insolvency and Bankruptcy Code in abeyance.
Chapter 2: Fiscal Developments

 Rising year-average of monthly gross GST collections.

 Composition of various taxes in Gross Tax Revenue (GTR)

Gross Tax Revenue (2021-22) = Rs. 25 lakh crore

Gross Tax Revenue (2022-23) = Rs. 27.5 lakh crore (budgeted figure)
 Various components of Central Government’s Debt.

Public debt was largely owned by institutional segments like banks (37.77%), insurance
companies (25.3%), RBI (16.2%), provident funds (4.44%), mutual funds (1.4%) etc. at the end
of March 2021.

 Debt to GDP ratio of Centre in the last few years.

 Deficit and Debt of State Governments in the last few years.

Chapter 3: External Sector

Merchandise Exports:
 Following the global trend, India’s merchandise exports recovered strongly from the
pandemic induced collapse and registered positive growth in the current financial year.
During 2021-22 (April-December), the merchandise exports recorded growth of 49.7 per
cent to US$ 301.4 billion, compared to corresponding period of last year and 26.5 per cent
over 2019-20 (April December), exceeding the pre-pandemic levels.

 Out of an ambitious export target of US$ 400 billion set for 2021-22, India has already
attained more than 75 per cent of it by exporting goods worth US$ 301.4 billion, which is
actually higher than the export target of US$ 300 billion set for the April-December period
of 2021-22.
 Following is the list of top ten major export commodities.
 Following are the top ten export destinations of our country in 2021-22.

 Major schemes and initiatives to boost exports:

 Remission of Duties and Taxes on Exported Products (RoDTEP)

 Developing District as Export Hub
 Production Linked Incentive (PLI) Scheme
 Electronic Platform for Preferential Certificate of Origin
 Infusion of Capital in EXIM Bank
 Capital Infusion in Export Credit Guarantee Corporation of India Ltd. (ECGC)

 Govt. is already in talk with several countries like Australia, UK, UAE etc. to sign Free
Trade Agreements. Gati Shakti National Master Plan for inter-modal connectivity will also
give a boost to exports.

Merchandise Imports:
 As the pandemic ebbed, India witnessed revival in domestic demand resulting in strong
import growth. The merchandise imports grew at the rate of 68.9 per cent to US$ 443.8
billion in April-December, 2021-22 over the corresponding period of last year and 21.9 per
cent over April- December, 2019-20, crossing the pre-pandemic levels.

 Following is the list of top ten import commodities

Following is the top ten commodity import sources.
Trade in Services:
 India has maintained its impressive performance in world services trade in the post COVID-
19 period. Despite pandemic induced global restrictions and weak tourism revenues,
India’s services exports recorded growth of 18.4 per cent to US$ 177.7 billion during 2021-
22 (April-December), over corresponding period a year earlier and 11.0 per cent growth over
2019-20 (April-December), surpassing the pre-pandemic levels.

 Services imports rose by 21.5 per cent to US$ 103.3 billion in 2021-22 (April-December)
from the corresponding period a year earlier and 6.2 per cent over 2019-20 (April-
December), crossing the pre-pandemic levels.

 India continues to be the largest remittance recipient country ($87 billion) in the world in
2021 and has been so since 2008.

 As of end- November 2021, India was the fourth largest forex reserves holder in the world
after China, Japan, and Switzerland.

 India’s net IIP stood at (-) 11.3 per cent of GDP (US$ -332 billion) as at end-September 2021
– a sustained improvement since end-March 2019.

 India’s external debt as at end-September 2021, is estimated at US$ 593.1 billion.

Commercial borrowings (US$ 218.8 billion) is the largest component of external debt. NRI
deposits (US$ 141.6) is the second largest component. Due to additional SDR allocation on
August 23, 2021, IMF SDRs rose by as much as US$ 17.6 billion to US$ 23.3 billion.

 As far as currency composition of external debt is concerned, US dollar denominated debt

remained the largest component of India’s external debt, with a share of 51 per cent at end-
September 2021, followed by the Indian rupee.
Chapter 4: Monetary Management and Financial Intermediation
 Gross Non-Performing advances ratio of Scheduled Commercial Banks (SCBs) continued to
decline from 11.2 per cent at end of 2017-18 to 6.9 per cent at end-September 2021.
Capital to risk-weighted asset ratio of SCBs continued to increase from 13 per cent in
2013-14 to 16.54 per cent at end-September 2021.

 GNPA ratio of NBFCs was higher at 6.55 per cent at end-September 2021, as compared to
6.06 per cent at end-March 2021.

 The following is an analysis of NBFC’ credit:

Chapter 5: Prices and Inflation

 WPI inflation has been higher than CPI inflation in the period between March 2021 to Dec
2021 and there has been a significant divergence also. Following are the reasons:

 Low base in the preceding year (WPI was 1.3% in 2020-21 due to pandemic)
 Retail inflation that had remained high during 2020-21 due to supply chain disruptions
and high food inflation, moderated in 2021-22 on account of effective supply side
management, resulting in a divergence between WPI and CPI based inflation.
 Different weights of different items in the CPI and WPI basket.
 While on the one hand, low food inflation pulled down CPI in 2021, on the other hand
high energy and input prices pulled up WPI based inflation rate in 2021.
 The manufactured sector not only uses crude oil but also several other imported items
as inputs such as iron ore, aluminium, other metals and cotton. The intermediate and
inputs items of WPI, not part of CPI, play a role in its divergence from CPI. The spike in
global prices of various input items which have a high import share, significantly
impacted WPI, but not CPI.
 Another reason for divergence is the lagging demand pick up. While production has
gradually picked up in 2021-22 to reach the pre-pandemic levels, consumption demand
is yet to normalize fully. With weak pass on, the divergence between WPI and CPI is
increasing but is expected to wane gradually with the weakening of the base effect.

“For rest of the chapters on Sustainable Development, Agriculture, Industry, Services and social
infrastructure, it is always better to complete the syllabus from the lectures and book. These
chapters in Survey are just repetitive information which has already been covered in the book
and class. Comprehensive MCQs from Budget and Economic Survey will be provided in the first
week of April that will be more helpful for your UPSC exam.”

The 6th edition of the “Indian Economy” book will be released in April
end 2022 covering all the conceptual/static/current updates from the
Budget/Economic Survey and the telegram channel.

For all the current analysis of ECONOMY from different newspapers,

please keep on following the telegram channel
“https://t.me/VivekSingh_Economy”
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